Switch to chips will protect customers, merchants




When it came to protecting her customers – and her business – from fraud, La-Ti-Da Boutique owner Shelley Genova didn’t think twice.

As soon as she heard about the switch from the magnetic strip on a credit card to the Europay, Mastercard and Visa (EMV) chip, she did her research. She realized she needed to make the switch so her terminals could accept the chip cards.

“You have to,” she said. “I look at all of these people with this old technology and I think they are going to have to buy the whole deal or take that risk.”

The risk she is referring to is the switch in liability for fraudulent activity.

If a merchant uses non-EMV compliant devices for EMV-compliant cards, then the merchant or the issuer will be liable if fraudulent activity occurs. The issuer would be the banks, credit unions and other financial institutions.

The payment networks of the world – Visa and MasterCard – are asking U.S. merchants to switch their processes to be able to accept the chip cards by Oct. 1 or face the liability.

The cost to do so is expensive, but the cost not to could be even more expensive.

The liability shift will expand to affect automatic-fuel dispensers and ATMs in October 2017.

“We know this technology is safer,” said Beth Kitchener, spokeswoman for MasterCard.

“All a liability shift means is whoever has the least-secure technology will be held responsible.”

Once the chip is “dipped” into the processor, the computer and the chip communicate to come up with a unique code for each transaction. When a card is simply swiped, the data is static and that makes it easier for thieves to counterfeit the card.

The U.S. is a little behind on using the chip technology. More than 80 countries around the world have switched to using the EMV cards to help minimize card fraud.

The Payments Security Task Force, a group of payment networks, banks, credit unions, retailers and others found eight institutions – representing about 50 percent of the total U.S. payment volume – estimate that 63 percent of their credit and debit cards will have chips by the end of 2016.

That percentage will expand to 98 percent by the end of 2017.

Columbus-based Huntington Bank, which has more than 700 branches in six Midwestern states, started the launch of chip cards July 1. Any new customers will be given credit cards with the chip. Existing cards will be switched starting in September.

The bank’s goal is to have every one of the credit-card customers switched to chip cards by October. Debit cards will also be switched and should be complete by the end of the year.

Scott Abramowitz, head of the retail credit-card team at Huntington, said the bank wants to provide fraud protection. “Based on all of the learnings throughout the world, there is a significant reduction in fraud [with chip cards],” Abramowitz said.

The cost to switch cards is also expensive. Abramowitz says it is 300 percent higher than the cost of a magnetic-strip card.

Pittsburgh-based PNC Bank has also started to switch its cards.

“I don’t think there is a negative at all,” said Drew Martin, executive vice president, Northern Ohio retail marketing manager. “I view this as an unbelievable positive. There may be some confusion at the merchants, just because people are adjusting.”

Youngstown-based Home Savings and Loan Co. and Cortland-based Cortland Banks also are working on the process to convert theircards.

Canfield-based Farmers National Bank did not provide information for this story.

La-Ti-Da Boutique, of Poland and Hudson, is not the only local merchant accepting the chip cards. Downtown Circle, 116 W. Federal St., a convenience store with a hot-meal section and attached Hookah Bar, also accepts them.

“Everything is going to turn into that,” said Al Adi, store owner. “We got it ahead of time. It’s positive security-wise. It does slow the transaction.”

Adi thinks the process will get faster in time, and he also expects to see more customers using chip cards.

Genova hasn’t had any problems with the switch.

“I think merchants should get it done now,” she said.

The Better Business of Bureau of the Mahoning Valley advises small businesses to take the time to contact their credit-card service provider about the switch.

“This is a very expensive venture, but we do recommend you shop around and get the best price possible, and don’t hesitate to contact local financial institutions,” said Melissa Ames, vice president of BBB Youngstown services.

The Ohio Council of Retail Merchants is urging members to analyze their risk.

“It is definitely a substantial cost and doesn’t generate any profit for them,” said Holly Nagle, manager of public affairs for the council.

For information on the switch to the chip go to: gochipcard.com.

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